But this week brings renewed attention to another revelation made during Deutsche Telekom’s (T-Mobile parent German company) Capital Markets Day in Bonn, Germany. There, the company unveiled its plan not only to sell Apple devices, but also to entirely eliminate carrier subsidies on new phones. That means if you buy a smartphone, you’re paying full price for it. T-Mobile will allow new customers to bring their own phone, or buy a new phone and pay for it all at once or in installments. But everyone will be shepherded into what the company calls its Value Packages.

As Digital Trends points out, T-Mobile's new gamble is going to be to show users that its deal, when spread out over two years, is better than its competitors'.

"As a baseline, a T-Mobile Value plan with unlimited voice, unlimited messaging, and 2 GB of 'high speed' data runs $60 a month," the site wrote. "Over 24 months that rolls out to $1,440. Verizon charges $100 a month for a roughly equivalent plan ($2,400 for two years), AT&T is $85 a month (for just 1 GB of data a month; $2,040 for two years), and Sprint is $80 a month ($1,920 for two years, although voice is limited to 450 minutes)."

Analysts say this move is potentially risky in the immediate term, but it could allow T-Mobile to be more distinctive than its larger competitors. "With the Softbank investment in Sprint, most [other carriers] in the market are trying to do these all-you-can-eat deals, so there needed to be a way for T-Mobile to be competitive,” Chris Silva, an analyst with Altimeter, told Ars.

The new smartphone users

As we’ve reported in the past, the American mobile market is becoming increasingly competitive. It's also becoming increasingly prepaid, particularly as more price-sensitive users have more options on smartphones.

And the fact of the matter is, T-Mobile has a long way to go.

“As a challenger in a very competitive market, T-Mobile needs to change the strategy when their postpaid base is shrinking in each quarter,” said Chetan Sharma, an independent telecom analyst, in an e-mail to Ars.

“The subsidy model is good for the consumers especially the ones who can do the math up front. For T-Mobile it might help attract a segment of the population that is price-sensitive and is savvy enough to look at the long-term benefits. However, I don’t really see the industry dynamics changing unless the other operators embrace the same non-subsidy model.”

Silva agreed, saying the industry as a whole needs to do more if it wants to expand higher-profit smartphones and related services to more of the population.

“You’re going to have to have cheaper and more flexible options for people as you try to raise the average revenue per user,” Silva added.

“That second 45 percent [of the market without a smartphone] is a whole different demographic than the people that bought the first iPhone. They need more flexibility from a payment perspective and their overall approach to how they’re going to acquire a phone is going to be from a secondary market.”

Price shock

However, others point out it will be quite a sticker shock for many users when they figure out how much a smartphone costs unsubsidized.

“My concern is that US consumers have become accustomed to spending $199 or less on a mobile device,” Hugues De La Vergne, an analyst at Gartner Research, told Ars. He added this strategy “might make things difficult for T-Mobile.”

“All of a sudden telling consumers that the Samsung or HTC device they want may cost $199 or less on other operators but will cost $400 to 500 on T-Mobile will be a tough sell without a lot of education and advertising into the total cost of ownership of the device, of which the rate plan is the largest part. It is going to be tough for the fourth largest operator to reset handset pricing expectations overnight.”

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A $249 unsubsidized Lumia 620 plus a T-Mobile value plan of $60 per month seems like a pretty darned affordable way to get a respectable-quality smartphone running a new OS without spending a ton of money. Shame T-Mobile's coverage near me is so bad, or I might do that.

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"As a baseline, a T-Mobile Value plan with unlimited voice, unlimited messaging, and 2 GB of 'high speed' data runs $60 a month," the site wrote. "Over 24 months that rolls out to $1,440. Verizon charges $100 a month for a roughly equivalent plan ($2,400 a year), AT&T is $85 a month (for just 1 GB of data a month; $2,040 a year), and Sprint is $80 a month ($1,920 a year, although voice is limited to 450 minutes)."

The first bit of math is correct, the rest is busted (replace "a year" with "for contract period" or similar).

I don't think it will be all that hard for them. They will just present it with their financing model. 199$ down + 20 dollars a month for 20 months = 599$ phone but pricing that looks very similar to the subsidized pricing of their competitors and plans+ financing end up being a similar price. Matching sprint, 5$ cheaper than at&t and 20$ cheaper than Verizon. The difference being that once that 20 months is over your plan is now 20$ cheaper for as long as you are happy using your phone or you can opt for a cheaper phone with less monthly financing cost and pay less.

The issue is when they advertise 60$ a month for the plan and don't include phone costs. Then it looks like a bait and switch were you end up paying more than they advertised.

A $249 unsubsidized Lumia 620 plus a T-Mobile value plan of $60 per month seems like a pretty darned affordable way to get a respectable-quality smartphone running a new OS without spending a ton of money. Shame T-Mobile's coverage near me is so bad, or I might do that.

I love the value plans (I pay for my phones up front) and I'm not sure it bodes well for the human race if people can't see the deal in paying in installments at a similar price to what they are paying now and THEN dropping to a much lower price after the phone is paid off.

The article places all this emphasis on how consumers will be scared off by the sticker shock of phones, but if they choose the installment pricing with value plans they aren't paying full price up front. How is it scary to a consumer to pay $199 for a phone and then $60 a month + $20 a month for like 20 months versus paying $199 for a phone and then $80+ a month indefinitely?

I've personally convinced several friends and family members to switch to value plans. It only makes sense and T-Mobile has excellent coverage in the Louisville area.

I just switched a friend at work off of Verizon paying $80 a month with a Galaxy S3 to the T-Mobile $30 (100 minutes + unlimited data/messaging) prepaid plan with a Nexus 4. That's an even more killer deal as the Nexus 4 was only $380ish after shipping and tax, but she's paying only $30 a month versus $80. A lot of people spend very little time talking on their phone... and if that's the case you can't beat an 8 or 16gb Nexus 4 on the $30 a month T-Mobile plan.

I love the value plans (I pay for my phones up front) and I'm not sure it bodes well for the human race if people can't see the deal in paying in installments at a similar price to what they are paying now and THEN dropping to a much lower price after the phone is paid off.

The article places all this emphasis on how consumers will be scared off by the sticker shock of phones, but if they choose the installment pricing with value plans they aren't paying full price up front. How is it scary to a consumer to pay $199 for a phone and then $60 a month + $20 a month for like 20 months versus paying $199 for a phone and then $80+ a month indefinitely?

I've personally convinced several friends and family members to switch to value plans. It only makes sense and T-Mobile has excellent coverage in the Louisville area.

I just switched a friend at work off of Verizon paying $80 a month with a Galaxy S3 to the T-Mobile $30 (100 minutes + unlimited data/messaging) prepaid plan with a Nexus 4. That's an even more killer deal as the Nexus 4 was only $380ish after shipping and tax, but she's paying only $30 a month versus $80. A lot of people spend very little time talking on their phone... and if that's the case you can't beat an 8 or 16gb Nexus 4 on the $30 a month T-Mobile plan.

It's worse if you aren't a the kind of person who absolutley has to have the latest and greatest phone every 12/18/24 months, because the prices don't decrease after your subsidy period. You feel compelled to purchase a new phone since you don't get a break anyway, which means that you're out of another $200 and locked into another 24 month contract cycle.

I love the idea of breaking the carrier subsidy model, but for me financially it doesn't seem to make a lot of sense. I pay ~$60 on Verizon for 450 minutes and 2GB of data, both of which is just about right for me, and I still get subsidized pricing on the phone. So about $1450 for 24 months of service and $200 for the subsidized phone. If I was paying $600 for a new phone, I'd need to cut my monthly price by $17 just to break even over the 24 months, and by more if I want to actually come out ahead. So far I haven't found many plans that would let me do that while keeping the same level of service.

Can someone do a present value analysis? Just a quick crunch in my head, At 500 dollars for a phone and their plan that's a price of 1940 which is only 100 less than att so anything approaching 3% interest /inflation kills this deal right? (I realize you get half the data on att but ignoring this) I realize you aren't paying for the full two years upfront so this is probably irrelevant... I'm also assuming there is no 2year contract but I didn't see it mentioned above. I'm on Verizon with an unlimited plan grandfathered in so I'm never switching but I can't imagine going with them unless I lived in a major market which I don't.

The trouble is most carriers in the US offer subsides to phone makers. Their customers are used to at least think they are getting a deal on a phone.Of course it looks good to pay only $199 for a iPhone instead of $500. But the fact remains you pay one way or another. The laughable part is anyone who actually pays that $500 does not get any breaks on service costs. Sure you don't have to sign a contract. But how much is that really worth? If indeed carriers like T-mobile want more customers. It will have to make it worth something to have customers forgo that familiar subside. Is what T Mobile doing enough?Because most people are credit hounds, buy a better car stretch the payments out. Buy a better house stretch the payments out. Pay $199 for a iPhone stretch the rest out on a two year contract. Get another subsidized phone. This is how American buys a phone.

So, this could make T Mobile the easiest provider for people who typically desire high end phones that are released more frequently than 2 years ? Sounds good to me. The person could start out thinking "$20 a month extra for the phone" and then pay it all off a year later when they "have to get the iPhone 6S" and start the cycle fresh again.

Are they as cheap as others, no, but tell someone about Simple Mobile and they go "huh?" whereas they've seen T-Mobile commercials with the hot girl in leather/pink.

As a baseline, a T-Mobile Value plan with unlimited voice, unlimited messaging, and 2 GB of 'high speed' data runs $60 a month.

Err, T-Mobile already offers a $30 a month prepaid plan that includes 100 minutes of voice, unlimited messaging, and 5GB of 'high speed' data. Giving up 3GB of un-throttled data and paying an extra $30 a month just to go from 100 minutes to unlimited doesn't strike me as a very good "value", especially in the smartphone age.

I pay ~$60 on Verizon for 450 minutes and 2GB of data, both of which is just about right for me, and I still get subsidized pricing on the phone.

How? I want that plan. Looking online they want $100/month for me to get that.

I think partly this is grandfathered, and partly because of an employer discount of 12%, also no text messages...which is the thing that makes it the hardest to replicate this plan on other carriers for significantly less money.

A $249 unsubsidized Lumia 620 plus a T-Mobile value plan of $60 per month seems like a pretty darned affordable way to get a respectable-quality smartphone running a new OS without spending a ton of money. Shame T-Mobile's coverage near me is so bad, or I might do that.

This is what I've been doing for several months with a Lumia 710 on Straight Talk for only $50/mo. Internet sharing is even enabled on the phone and works fine. The only issue I've had is that when I setup the APN for MMS, streaming Xbox music doesn't work (downloading does); if I remove the MMS APN streaming works again.

T-mobile:$650 at the apple store for the iPhone 5 unlocked 16gb$55 per month for the 500 min value package= $1970

I mean you HAVE to add the cost of the actual phone, why wouldn't you?

anyways that's a difference of $150.

this is what we call savings? $150 over 2 years? That's a savings of $6.25 per month.

Now I imagine the millionaire next store might say a penny saved is a penny earned, but I'm not sure how a savings of a little more than $6 a month would hold up to inflation over two years. I know the inflation for the past few years has been abysmal, but there is still inflation nonetheless.

Virgin Mobile:$450 for the iPhone 4s, one version back$45 per month for 1200 minutes= $1530or$35 per month for 300 minutes (I have this plan) = $1290

Virgin Mobile savings is $830 over 2 years which is $35 per month in savings.

I know, in the articles examples, you could be saving a bit compared to AT&T and Verizon (not counting corporate discounts if you get them through your company) BUT Virgin mobile is still ahead in that case. The Sprint comparison? once you add the cost of the phones themselves you are talking about a savings of $30 over two years compared to Sprints plan...

A brief glance at the family plans are not any better.

Giving a couple more min. of thought, I suppose the only upshot here is that you get 4g unlimited data with no caps or throttling. I suppose that might be enough for some, I personally can't break my 2.5gb allotment (virgin is unlimited with throttling after 2.5gb)

I noticed this when I recently got my 8X a few weeks ago. I was considering buying the phone outright to avoid paying more in the long run, but when I started going through their plans and running the numbers, I realized that you don't save any money at all by buying up front! I was shocked (and excited)! I had been considering switching to Verizon to get the better version of the 8X (no way I was switching to AT&T just to get the 920), but when I learned this I said "This is the most awesome thing I've seen US carriers do in years, no way in hell I'm switching now!"

Can someone do a present value analysis? Just a quick crunch in my head, At 500 dollars for a phone and their plan that's a price of 1940 which is only 100 less than att so anything approaching 3% interest /inflation kills this deal right? (I realize you get half the data on att but ignoring this) I realize you aren't paying for the full two years upfront so this is probably irrelevant... I'm also assuming there is no 2year contract but I didn't see it mentioned above. I'm on Verizon with an unlimited plan grandfathered in so I'm never switching but I can't imagine going with them unless I lived in a major market which I don't.

You want a present value analysis. Here's the present value analysis:The current 2yr T-Bill rate is .25% so IT DOESN'T FSCKING MATTER.

I know you are desperate to show off to the world the value of your MBA, and how you are smarter than the rest of us; but didn't anyone ever teach you basic approximation skills --- rule of 72 and all that?

Apart from the wankers mistakenly redirecting me to a tethering service sales page even though It's already part of my plan, I've never had any complaints for T-mobile.

I got around the redirects by just rebooting the phone and reconnecting and proceeded to express my displeasure by seeding a few (completely legal) linux distro .isos for a few hours and clog the tubes a bit.

I pay ~$60 on Verizon for 450 minutes and 2GB of data, both of which is just about right for me, and I still get subsidized pricing on the phone.

How? I want that plan. Looking online they want $100/month for me to get that.

I think partly this is grandfathered, and partly because of an employer discount of 12%, also no text messages..

Are you sure about that? I have a grandfathered plan with 20% off employee discount and I'm still paying ~$68/month. Without texts. And grandfathered plans are unlimited, not 2GB, so you're probably not grandfathered.

I'm kind of doubting that your modest discount somehow gets you the $100 plan for 60 bucks. How carefully have you looked at your bill?

I love the idea of breaking the carrier subsidy model, but for me financially it doesn't seem to make a lot of sense. I pay ~$60 on Verizon for 450 minutes and 2GB of data, both of which is just about right for me, and I still get subsidized pricing on the phone. So about $1450 for 24 months of service and $200 for the subsidized phone. If I was paying $600 for a new phone, I'd need to cut my monthly price by $17 just to break even over the 24 months, and by more if I want to actually come out ahead. So far I haven't found many plans that would let me do that while keeping the same level of service.

This is an exceptionally important point.EVERY DAMN TIME this issue of cellphone plans is raised, Ars immediately assumes that what EVERYONE wants is unlimited everything. This is utter nonsense. And if you don't care about unlimited everything --- if 200MB/month of data and 20c per text for the 2 texts you send a month works for you --- the math becomes very different.

In my case, for example what I am paying ATT per month (including all taxes, subsidies, fees, surcharges, and random random bullshit) is about $65/month --- and that includes my iPhone subsidy. T-Mobile doesn't look especially good compared to that. I ran the numbers on other alternatives, like buying an unlocked iPhone and using Straight Talk, and they didn't come out any better --- for about $5 extra per month I'm getting LTE, and that sees a reasonable tradeoff.

My point is that what T-Mo is offering, the no-subsidy model, is a good start, but if they insist on yoking it to a very expensive base plan because all they offer is essentially unlimited everything, they're just going to find that many of the people they WANT to attract, the people who run the numbers and do the math, still don't find them competitive.

First, they've lowered the costs on their plans substantially. Once you sign up for a value plan, each phone you add only adds $5 per month. Other carriers are charging as much as $40 per phone per month. Data is super cheap too, with a $5 option for 200 MB (which is fine for many) or $10 for 2 GB. So adding a smartphone to a plan can be as little as $10 per month, and in most cases would be no more than $15 per month. So much cheaper than the other guys.

The other is that they offer 0% financing, $15 to $20 per month, for up to 20 months. So the $549 for a mid-to-high-end smartphone ends up being $149 out the door, then $20 per month for 20 months. After those 20 months are up, that $20 per month goes away, and you're down to paying just the $10-15 per month for the phone.

What this ends up meaning is that people who are happy with their phones (or bring their own) end up with super cheap plans, and those that want high end phones can get them, pay effectively the same or less as they would on another carrier, and once the terms of their financing are up, they're just paying for service.

It's such a brilliant plan that I actually reactivated an old smartphone because I could add it (with data) for just $10/month. Name another carrier that will let you do that.

In Canada we have an interesting playing field. The big 3 offer all the latest phones and LTE. They also lock you into 3 year contracts. There are no discounts for people who buy an unlocked phone so unless you travel a lot it makes no sense to do that. They also offer pre-paid, but it's aimed at people with dumb phones or tablets.

The smaller carriers operate on different frequencies which limits the phones they support (no iPhone). They also lack LTE. Their sales pitch is unlimited talk, text and data inside their zones at low rates the big 3 don't even try to compete with. The zones are aimed at urbanites and heading out to the suburbs can result in a nasty pile of roaming charges if you venture too far. They don't have contracts: you either pay full price up front or get a phone on a "tab" which goes down each month. It appears to take roughly 4 years to pay off a phone just by using it so in that sense you're tied to the hardware even longer than you would be on contract.

Around my office we have a majority of iPhone users (all with the big 3 of course) and a growing minority of Android users are are happily saving tons of money with a smaller carrier.

I'm sorry for this cynical post to be my first, but maybe I AM just a dumb American; I really don't see what the savings are here:

Carriers don't pay the full Apple rate for iPhones. During the Samsung trial it looked like Apple was claiming something like $500 bucks a phone sold to carriers, and that includes people paying more for the extra capacity models. My guess is that if you agree to buy through them, you'll get it at a discount over the Apple store in exchange for a contract (or something like that).

Forget the iPhone, get a $299 Nexus 4 and this works out even better.All they really need to do is strike a deal for better marketing with Google, who is already pushing down prices for phones/tablets, and this will take off. I'm sure down the line when Amazon gets a phone on the market, they can get them on board as well.

It's about time the real costs of phones are exposed independently of the plans. That's the way the rest of the world works.

Why don't they offer subsidies as an option that goes away after two years? Best of both worlds.

T-mobile basically already offers this option. With a value plan you can either bring your own phone, buy one from them at full price, or pay a down payment (similar amount as subsidized phones) and then pay the remaining balance over 20 months (4 less than the traditional 24 month plan) interest free. So T-mobile allows you to pay in a similar manner as the other carriers or all up-front. Additionally the "subsidy"/payments end after 20 months.

These T-mobile plans should be very attractive to phone brand loyalists (iPhone, Galaxy, Lumina...) since many wait until a new version is out prior to upgrading. If the release happens to be more than 20 months after the last purchase, you are not continuing to pay the subsidized monthly cost while waiting.

Now I imagine the millionaire next store might say a penny saved is a penny earned, but I'm not sure how a savings of a little more than $6 a month would hold up to inflation over two years. I know the inflation for the past few years has been abysmal, but there is still inflation nonetheless.

Paying $450 extra up front vs $25 extra a month for two years, even with a generous 5% inflation rate, comes out to $496 vs $629. That's a savings of $133. Even if you'd make 5% interest on the money you don't pay up front, you're still saving about $115.

Plus the article mentions there will be an option to pay in installments.

Forget the iPhone, get a $299 Nexus 4 and this works out even better.All they really need to do is strike a deal for better marketing with Google, who is already pushing down prices for phones/tablets, and this will take off. I'm sure down the line when Amazon gets a phone on the market, they can get them on board as well.

It's about time the real costs of phones are exposed independently of the plans. That's the way the rest of the world works.